Fast, actionable advice from Founders, CEOs, and Investors

What’s the best way to monetize?

Sam Altman (President at Y Combinator) Startup PlaybookIn any case, try to get to ramen profitability i. e. , make enough money so that the founders can live on ramen as quickly as you can.

Fred Wilson (Co-Founder and Partner at Union Square Ventures) Free Vs Paid – AVCWe’ve struggled with early stage investments in enterprise oriented web services. It’s much better, in my opinion, to go with the freemium model, give a version of the service away for free to all comers, get a lot of users, get good market feedback, then develop a premium version of the product/service for sale to enterprise customers. If your free version is popular with a lot of users, your customer base is the target for the upsell and you mi… (read more)

Fred Wilson (Co-Founder and Partner at Union Square Ventures) The First Law Of Internet Physics – AVCYou can extract a higher average revenue per user (ARPU) from a paid model, but you get so many fewer users that it’s better to extract a lower ARPU with a free model and get many more users. The rule: many users * low arpu >>>> few users * high arpu. I guess a corollary is that you can implement a freemium model on top of a free model and turn some of your users into high ARPU customers, but they will always be a small portion of the total numbe… (read more)

Tomasz Tunguz (Partner at Redpoint Ventures) The Common Characteristics of Successful Freemium CompaniesStartups should consider freemium when four conditions are met: The number of potential free users numbers in the tens of millions. Freemium conversion funnels tend to be very lossy. On average, 1-4% of users convert to paid. 2. Free distribution is a competitive advantage in the market. 3. The product used by a free user has a simple and straightforward value proposition. Because customers are educating themselves, freemium products have a very … (read more)

Tomasz Tunguz (Partner at Redpoint Ventures) The 3 strategies of freemium companies | A Founder’s NotebookSuccessful freemium companies do three things: 1. They use free to market, educate and win mindshare. The Internet enables potential customers to research products much more deeply before engaging with a sales person. 2. They leverage usage data to improve their product. The large amount of users using the product enables A/B testing with statistical significance, a non-trivial strategic advantage. 3. They gather information about their customer … (read more)

Alex Austin (Founder of Branch Metrics) Mobile App Developers are Suffering — The Startup — Medium[Mobile-only business models aren’t working]. According to a study done by Activate, the top 20 app publishers, representing less than 0. 005% of all apps, earn 60% of all app store revenue. The 10th most popular app (Skype) has a small fraction of the traffic seen by the top app (Facebook), and the 1,000th app (Pixable) has just 0. 2%. Yet in the past four weeks, there were 45,000 new apps submitted to the iOS App Store.

Chris Savage (CEO @ Wistia) “Monetize Backwards” to Build a SaaS Business That Lasts | Wistia BlogAt Wistia, we started with a paid plan only, and over the last eight years, we’ve progressively made the product more and more free. It’s counterintuitive, but constraining growth by not making our product free from the start has been one of the best decisions we’ve made.

David Jackson (Founder, Seeking Alpha) Measurement is the key to success for content businesses; but measurement of what? | A Founder’s NotebookIf your main revenue stream is ads, you’ll optimize for page views, namely ad inventory. you’ll find that many levers are more important than content quality, such as titles, populist subjects appropriate for social sharing, and page-maximizing formats such as slide shows. But if your main revenue stream is paid subscriptions, then quality the key determinant of willingness to pay comes first.

Jeff Haynie (CEO, co-founder at Appcelerator) Five things I will do different for my next startup — Life Tips — MediumThe conundrum that a lot of companies face — in fact most of them — is the balance between reach and revenue (or in another way to frame it: the conflict between the two). The further you maximize reach the harder it is to scale revenue — or at the very least, more friction is introduced in capturing it.

Sachin Rekhi (Group Product Manager at LinkedIn) Lessons Learned on the B2C2B Model | Sachin RekhiThe main advantage of B2C2B [selling to individual employees as a path to an enterprise sale] compared to traditional top-down sales is that it can significantly reduce your customer cost of acquisition. The traditional B2B sales process requires large marketing budgets and long sales cycles. With B2C2B, you can gather detailed demographic and behavioral data on each of your end users that can help to significantly optimize and prioritize your up… (read more)

Boris Wertz (Founder of version one ventures) Does free/freemium work in the enterprise? – Version OneWhile free rules the consumer world, it can be a different story in the enterprise: Offering an app/service for free can send the wrong message. Here, free can be equated with low quality. While viral growth and network effects exist in certain enterprise settings, network effects are typically more limited in a B2B environment compared with B2C. Free isn’t necessarily sustainable with B2B. Acquiring business users may prove too costly, forcing s… (read more)

Fred Wilson (Co-Founder and Partner at Union Square Ventures) In Defense Of Free – AVCWhen scale matters, when network effects matter, when your users are creating the content and the value, free is the business model of choice.

David Jackson (Founder, Seeking Alpha) The problem with content paywalls, and the solution in one vertical | A Founder’s NotebookHow could we create a valuable subscription product without reducing the ubiquitous mindshare we have among [customers], and the distribution and exposure we recieve? We’d give our paying subscribers an early look at the best investment ideas in Seeking Alpha, and exclusive access to single-stock articles 30 days after publication.